The business hosting our annual fund raising dinner in its auditorium wants to deduct the rental value as a charitable contribution. Is it appropriate to do so?
No. Taxpayers are not permitted to take a charitable contribution deduction for gifts of services, and the IRS considers free use of space or equipment to be a service. The business may deduct out of pocket expenses incurred in connection with the event, but not the value of the space.
The issue this question raises for me is a common one faced by nonprofits -- donors and would-be donors trying to turn the nonprofit into a tax advisor. You really have to train your board and staff to deftly sidestep these questions -- I like "I'm not sure, what does your tax preparer say?"